Ferry's Furniture Outlet has an accounts receivable period of 51.06 days and an accounts payable period...

Ferry's Furniture Outlet has an accounts receivable period of 51.06 days and an accounts payable period of 43.07 days. The company turns over its inventory 5.69 times per year. What is the length of the company's operating cycle? Assume 365 days per year.

94.13 days

72.14 days

21.08 days

115.21 days

107.22 days

Expert Solution

The formula for computing the operating cycle is:

Operating cycle= Inventory period+ Receivables collection period

The receivables collection period is already given. So, the question is solved by first calculating the inventory period. Inventory period is calculated using the below formula:

Days of inventory = 365/ Inventory turnover

= 365/ 5.69

= 64.15 days

Operating cycle= 64.15 days + 51.06 days

= 115.2076 days

Therefore, the operating cycle is 115.21 days.

Hence, the answer is option d.

In case of any query, kindly comment on the solution.

jeff jeffy answered 8 months ago

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